Asian Currencies: Korean Won, Peso Gain as Credit Concerns Ease

By Lilian Karunungan

Oct. 14 (Bloomberg) -- Asian currencies rose, led by South Korea's won, as shares rallied worldwide on a U.S.-led push to prop up troubled banks and flood the global financial system with dollars.

Eight of Asia's 10 most-active currencies outside Japan advanced as the U.S. prepared to buy stakes in nine major banks to prevent a collapse of credit markets. France, Germany and three other European Union nations yesterday agreed to commit $1.8 trillion to guarantee loans and buy shares of lenders.

``There's a relief rally for regional stocks and currencies because the market likes the bank recapitalization story,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``The cost to these bank bailouts will be a fiscal crisis down the road. We are certainly not out of the woods.''

The won rose 2.5 percent to 1,209.30 per dollar as of 12:44 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The advance pared this year's loss to 23 percent, still the biggest drop among Asia's 10 most-traded currencies. The peso gained 0.5 percent to 47.045 in Manila, near the highest level since Oct. 2, according to Tullett Prebon Plc.

The won climbed for a fourth day, extending gains in the period to 15.5 percent, as banks also refrained from buying dollars after Deputy Finance Minister Shin Je Yoon said last week that the government will check for ``speculative forces'' in the market. The Kospi index jumped 4.3 percent as foreign investors bought more local shares than they sold for the first time in two weeks, according to Korea Exchange.

Emerging Economies

``The won is gaining lost ground fast as local stocks extended their rally,'' said Lee Myung Hoon, a Seoul-based currency trader with Industrial Bank of Korea. ``The regulator's day-to-day review of currency trades is also making speculators refrain from bidding for dollars aggressively.''

South Korea's Finance Minister Kang Man Soo said global efforts to stabilize the world's financial markets need to include emerging and developing countries.

``We should not forget that emerging and developing economies are suffering the most,'' Kang said today in a prepared speech at the annual meetings of the International Monetary Fund and the World Bank in Washington. Measures such as liquidity provision should ``engage'' these economies, he said.

U.S. stocks staged the biggest rally in seven decades. The Standard & Poor's 500 Index rebounded from its worst week in 75 years with an 11.6 percent advance, its steepest since 1939, and the Dow Jones Industrial Average climbed more than 936 points.

Oil Below $85

The Philippine peso rose to a one-week high as crude oil below $85 a barrel reduced demand for U.S. dollars from local petroleum companies. The Philippine Stock Exchange Index climbed for a second day.

``The peso is on an appreciating tone after the global effort boosted sentiment in emerging markets and oil prices are lower, which means less demand for dollars,'' said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila.

The peso may strengthen to 46.80 tomorrow should it close below 47 today, Banco's Ravelas said. The Southeast Asian country imports almost all the oil it needs.

Indonesia's rupiah, which last week weakened past 10,000 per dollar for the first time in three years, gained for a second day. Indonesia's government yesterday raised the ceiling for bank deposit guarantees 20-fold to 2 billion rupiah ($203,000) to boost investor confidence in the nation's financial system.

`Good Signs'

``Asian and U.S. stocks rose and those are good signs for the rupiah,'' said Lindawati Susanto, head of currency trading at PT Bank Resona Perdania in Jakarta. ``Indonesia also increased the deposit insurance. That's also positive for the rupiah.''

The rupiah rose 1.1 percent to 9,713 in Jakarta, from 9,820 yesterday, according to data compiled by Bloomberg. The currency has gained 4.3 percent from 10,130 on Oct. 10, the weakest since November 2005.

The local currency will trade between 9,700 and 9,800 against the dollar today, Susanto forecast.

Elsewhere, the Singapore dollar jumped 0.8 percent to S$1.46 against the U.S. currency. The Thai baht advanced 0.4 percent to 34.11 and the Malaysian ringgit gained 0.2 percent to 3.4880. Taiwan's dollar rose 0.1 percent NT$32.352 and Vietnam's dong was unchanged at 16,605.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net;